Marriott Vacations target cut with buy rating

Stifel adjusted its outlook on Marriott Vacations Worldwide (NYSE:VAC), reducing the price target to $96.50 from the previous $108.00. Despite this change, the firm maintained its Buy rating on the stock.

The adjustment comes after a period where Marriott Vacations shares have underperformed, particularly in comparison to the broader market, with a 46.3% decline from the start of 2023 through Thursday's close, against the S&P 500's gain of 48.5%.

The new price target is based on a valuation of 7.2 times the company's projected adjusted EBITDA for 2025. Stifel acknowledges the multiple's downward re-rating over the last 21 months, attributing it to several setbacks faced by the company.

However, the firm also notes signs of resilience within Marriott Vacations' operations. The company's portfolio occupancy remains high at around 90%, and consumer engagement is strong, with over 400,000 tours scheduled for 2024.

Looking ahead, Marriott Vacations anticipates year-over-year growth in contract sales and revenues for 2025. This forecast does not include potential gains from a recovery in its Maui operations, which, if realized, could provide an additional boost to growth.

Furthermore, the company expects maintenance fees to rise at a modest rate in 2025. This outlook reflects a degree of cautious optimism about the company's ability to increase its revenue streams in the near future.

The analysis by Stifel suggests that, despite the previous challenges and stock performance issues, there are elements of stability and potential growth in Marriott Vacations' business model.

The firm's maintained Buy rating indicates a belief that the stock could represent a valuable opportunity for investors, especially considering the expected improvements in the coming years.

InvestingPro Insights

Marriott Vacations Worldwide (NYSE:VAC) appears to be navigating through a challenging period with a strategic approach, as reflected in recent data from InvestingPro. Management's aggressive share buyback initiative, as noted in one of the InvestingPro Tips, signals a confidence in the company's valuation and future prospects. This is further supported by the fact that Marriott Vacations has not only maintained but also raised its dividend for 11 consecutive years, with the last three years seeing consistent growth. Such a track record of dividend payments suggests a stable cash flow and commitment to returning value to shareholders.

From a financial perspective, Marriott Vacations holds a market capitalization of $2.5 billion, with a P/E ratio standing at 16.36. Despite a slight decline in revenue growth over the last twelve months, the company's gross profit margin remains robust at 56.75%. Additionally, Marriott Vacations' liquid assets exceed its short-term obligations, indicating a solid liquidity position that may reassure investors about the company's financial health.

The stock's current price is hovering near its 52-week low, which, coupled with a dividend yield of 4.26%, could potentially offer an attractive entry point for dividend-seeking investors. It's worth noting that analysts predict the company will be profitable this year, which aligns with the positive outlook for sales growth in the current year mentioned in another InvestingPro Tip. For those interested in exploring further, InvestingPro offers additional tips on Marriott Vacations, providing a more comprehensive analysis for potential investors.

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